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Author Question: Are lump-sum taxes regressive or progressive? Is the deadweight loss of taxation the same for ... (Read 78 times)

JMatthes

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on: Jun 29, 2018
Are lump-sum taxes regressive or progressive? Is the deadweight loss of taxation the same for different types of taxes?
 
  What will be an ideal response?

Question 2

Refer to Figure 5-2. The marginal benefit of the last unit produced is represented by the price
 
  A) Pa. B) Pb. C) Pc. D) Pf.


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cclemon1

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Reply #1 on: Jun 29, 2018
Answer to Question 1

Lump-sum taxes force the rich and the poor people to pay the same amount  and thus impose a higher tax rate on the poor. Therefore, they are an example of regressive taxes. Not all taxes lead to a deadweight loss. With lump-sum taxes, all citizens in an economy would pay the government the same amount regardless of their earnings or market demand. Since they will pay the same amount in a lump-sum tax no matter what they do, the lump-sum tax does not distort their decisions. Since such taxes do not distort decisions, they do not lead to a deadweight loss. There are very few examples of real world lump-sum taxes and so virtually all taxes that people actually pay do lead to deadweight losses.

Answer to Question 2

B


JMatthes

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Reply 2 on: Jun 29, 2018
Excellent

upturnedfurball

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Reply 3 on: Yesterday
Great answer, keep it coming :)

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